Crunch Time For Fox's As Burton's Eye Merger

Some of Britain's best-known food brands could be heading for common ownership as part of a merger of Burton's and Fox's, two of the country’s biggest biscuit producers.

Sky News has learnt that Burton’s Biscuits has approached the owner of Fox’s about a potential takeover deal that would create a bigger rival to United Biscuits (UB), the UK’s biggest manufacturer of the snacks.

Initial discussions between the two sides are already understood to have taken place, although they are at a very preliminary stage and may not lead to a deal, one source indicated on Friday.

A merger would bring together products such as Wagon Wheels and Jammie Dodgers, which are owned by Burton’s, and the large portfolio branded using the Fox’s name.

Securing a deal could appeal to the management of 2Sisters, the parent company of Fox’s, which is seeking ways to reduce its significant debt burden, including through potential asset sales.

The value attributed to Fox’s, which was formerly part of Northern Foods, is unclear.

The approach from Burton’s comes six months after it was acquired by the Ontario Teachers’ Pension Plan (OTPP), a giant Canadian pension fund, in a deal understood to have been worth approximately £350m.

At the time of that deal, the OTPP executive who led the Burton’s takeover, Jo Taylor, said it had been carried out with a view to future takeover opportunities.

"We look forward to supporting Burton's outstanding management team to grow the business in the UK and further into overseas markets. There are also many strategic acquisitions to consider in those territories that can enhance these ambitious growth plans.”

OTPP has become a voracious acquirer of British companies in recent years, taking over Camelot, the National Lottery operator, and Busy Bees, the nursery chain.

Burton's is Britain's second-largest biscuits manufacturer by sales, behind UB, which is also owned by two private equity groups, Blackstone (NYSE: BX - news) and PAI Partners.

UB will itself be put up for sale later this year, with Goldman Sachs (NYSE: GS-PB - news) and JP Morgan (Other OTC: JPYYL - news) , the Wall Street banks, poised to be formally engaged to run an auction that will not begin before the autumn.

Based in Hertfordshire, Burton's traces its roots back to the mid-1800s when it was founded by George Burton.

It employs more than 2,200 people around the UK in three manufacturing facilities in Llantarnam, Edinburgh and Blackpool, a chocolate refinery in Moreton and a central distribution hub in Liverpool.

Burton’s also produces Cadbury Biscuits, Lyon's and Maryland cookies, which compete with UB brands such as McVitie’s digestives, Jaffa Cakes and Penguin (SES: E1:P13.SI - news) .

If merger talks between Burton’s and Fox’s prove unsuccessful, OTPP is likely to draw up plans to bid for part or all of UB, although it would probably be prevented for competition reasons from doing so if a deal with Fox’s goes ahead.

Spokesmen for Burton's, 2Sisters and UB all declined to comment on Friday.